US Initial Jobless Claims dropped to 206K last week
- Initial Jobless Claims dropped to 206K vs. the previous week.
- Continuing Jobless Claims went up to 1.799M.
According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance shrunk to 206K for the week ending August 15. The latest print came in below initial estimates (210K) and was lower than the previous week’s 212K (revised from 209K).
Additionally, the 4-week moving average increased by 4.250K vs. the previous week’s revised prints.
The report also indicated that Continuing Jobless Claims rose by 18K to 1.799M for the week ending August 8.
Market reaction
The Greenback alternates gains with losses in the area of three-month lows against its peers on Thursday, with the US Dollar Index (DXY) retreating to the sub-99.00 region despite the decent bounce in US Treasury yields across the curve.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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